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24–087 PDF 2005

IMPLEMENTING COST ACCOUNTING AT THE

DEPARTMENT OF VETERANS AFFAIRS AND THE

DEPARTMENT OF LABOR

HEARING

BEFORE THE

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,

FINANCE, AND ACCOUNTABILITY

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

SEPTEMBER 21, 2005

Serial No. 109–84

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

CHRISTOPHER SHAYS, Connecticut

DAN BURTON, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

CANDICE S. MILLER, Michigan

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

GINNY BROWN-WAITE, Florida

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

CHARLES W. DENT, Pennsylvania

VIRGINIA FOXX, North Carolina

JEAN SCHMIDT, Ohio

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. DUTCH RUPPERSBERGER, Maryland

BRIAN HIGGINS, New York

ELEANOR HOLMES NORTON, District of

Columbia

———

BERNARD SANDERS, Vermont

(Independent)

MELISSA WOJCIAK, Staff Director

DAVID MARIN, Deputy Staff Director

ROB BORDEN, Parliamentarian

TERESA AUSTIN, Chief Clerk

PHIL BARNETT, Minority Chief of Staff/Chief Counsel

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT, FINANCE, AND ACCOUNTABILITY

TODD RUSSELL PLATTS, Pennsylvania, Chairman

VIRGINIA FOXX, North Carolina

TOM DAVIS, Virginia

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

JOHN J. DUNCAN, JR., Tennessee

EDOLPHUS TOWNS, New York

MAJOR R. OWENS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

EX OFFICIO

HENRY A. WAXMAN, CALIFORNIA

MIKE HETTINGER, Staff Director

TABETHA MUELLER, Professional Staff Member

ERIN PHILLIPS, Clerk

ADAM BORDES, Minority Professional Staff Member

(III)

C O N T E N T S

Page

Hearing held on September 21, 2005 ..................................................................... 1

Statement of:

Martin, Robert, Director, Financial Management and Assurance, U.S.

Government Accountability Office; Samuel Mok, Chief Financial Officer, U.S. Department of Labor; and Tim S. McClain, General Counsel

and Acting Chief Management Officer, U.S. Department of Veterans

Affairs, accompanied by Ed Murray, VA Deputy Chief Financial Officer;

Jimmy Norris, Chief Financial Officer, U.S. Department of Veterans

Affairs; James Bohmbach, Chief Financial Officer, Veterans Benefits

Administration; and Dan Tucker, Chief Financial Officer, National

Cemetery Administration ............................................................................. 2

Martin, Robert ........................................................................................... 2

McClain, Tim S. ......................................................................................... 28

Mok, Samuel .............................................................................................. 15

Letters, statements, etc., submitted for the record by:

Martin, Robert, Director, Financial Management and Assurance, U.S.

Government Accountability Office, prepared statement of ....................... 5

McClain, Tim S., General Counsel and Acting Chief Management Officer,

U.S. Department of Veterans Affairs, prepared statement of ................... 30

Mok, Samuel, Chief Financial Officer, U.S. Department of Labor, prepared statement of ........................................................................................ 17

(1)

IMPLEMENTING COST ACCOUNTING AT THE

DEPARTMENT OF VETERANS AFFAIRS AND

THE DEPARTMENT OF LABOR

WEDNESDAY, SEPTEMBER 21, 2005

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,

FINANCE, AND ACCOUNTABILITY,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 2:40 p.m., in room

2247, Rayburn House Office Building, Hon. Todd Russell Platts

(chairman of the subcommittee) presiding.

Present: Representatives Platts and Duncan.

Staff present: Mike Hettinger, staff director; Dan Daly, Tabetha

Mueller, and Jessica Friedman, professional staff members; Erin

Phillips, clerk; Adam Bordes, minority professional staff member;

and Jean Gosa, minority assistant clerk.

Mr. PLATTS. This hearing of the Government Reform Subcommittee on Government Management, Finance, and Accountability will

come to order.

Mr. Towns will be joining us here shortly, and we believe we

have about an hour window before the next series of votes. So we

are going to see if we can get as far as we can on our testimony

and Q and A, and hopefully, those votes will be pushed off long

enough that we don’t have to have our witnesses here waiting

while we run through a series of votes.

In order to manage effectively, we need reliable information on

the true cost of Federal programs. In our current budget environment, this information takes on added importance as agencies try

to accomplish their missions with fewer resources. As a Nation at

war, and now recovering from one natural disaster, and a new hurricane threatening our shorelines, being responsible and efficient

with our taxpayer funds is all the more critical. With timely and

accurate cost information, managers can make sound decisions on

a day to day basis, and policymakers can prioritize scarce resources

more effectively.

The subcommittee has asked the Government Accountability Office to conduct a series of case studies to determine the extent to

which Federal agencies develop and use cost information. In its

first study, GAO looked at the Department of Veterans Affairs and

the Department of Labor. The results of this case study were released on September 2nd.

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We are pleased to have the author of the GAO report, Mr. Robert

Martin, here with us today. Mr. Martin, we thank you for your

work on this first study, and we look forward to subsequent work

on the other agencies and also your testimony with us today.

We are also joined by officials from the two Federal agencies that

were part of this initial case study: The Honorable Sam Mok, Chief

Financial Officer of the Department of Labor; and the Honorable

Tim McClain, General Counsel and Acting Chief Management Officer of the Department of Veterans Affairs.

On behalf of the subcommittee, again, we thank each of you for

being here with us. We will look forward to your testimony and

then to the opportunity to have Q and A with you. I think what

we will do is go into testimony. We do appreciate the written testimonies you have provided the subcommittee. If we can try to limit

our opening statements to about 5 minutes each, and try to get into

a good exchange with each of you, that would probably be most

helpful. When Mr. Towns arrives, if he has an opening statement,

we will proceed to his testimony or statement between our witnesses.

If I could ask each of our witnesses to stand and be sworn in.

It is a practice of the subcommittee. Any staff that will be advising

you as part of your testimony here today, if they would also take

the oath.

[Witnesses sworn.]

Mr. PLATTS. Thank you. You may be seated. The clerk will note

that all witnesses and staff participating have affirmed the oath.

We will proceed to our opening statements. Mr. Martin, I believe

we will begin with you in an overview of the case study that you

completed.

STATEMENTS OF ROBERT MARTIN, DIRECTOR, FINANCIAL

MANAGEMENT AND ASSURANCE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; SAMUEL MOK, CHIEF FINANCIAL

OFFICER, U.S. DEPARTMENT OF LABOR; AND TIM S.

MCCLAIN, GENERAL COUNSEL AND ACTING CHIEF MANAGEMENT OFFICER, U.S. DEPARTMENT OF VETERANS AFFAIRS,

ACCOMPANIED BY ED MURRAY, VA DEPUTY CHIEF FINANCIAL OFFICER; JIMMY NORRIS, CHIEF FINANCIAL OFFICER,

U.S. DEPARTMENT OF VETERANS AFFAIRS; JAMES

BOHMBACH, CHIEF FINANCIAL OFFICER, VETERANS BENEFITS ADMINISTRATION; AND DAN TUCKER, CHIEF FINANCIAL OFFICER, NATIONAL CEMETERY ADMINISTRATION

STATEMENT OF ROBERT MARTIN

Mr. MARTIN. Thank you, Mr. Chairman.

Mr. Chairman, I am pleased to be here today to talk about managerial cost accounting at the Departments of Labor and Veterans

Affairs. As you know, this topic is all about promoting efficiency

and the best use of limited resources. Managerial cost accounting

involves answering a very simple question: How much is it costing

us to do something? This involves analyzing financial and non-financial data to determine what it is costing us to achieve performance goals, to deliver programs, and to pursue other activities.

3

Mr. PLATTS. Mr. Martin, the mic is on, but pull it a little closer

to you, and direct it at you. Yes, that is great. Thank you. I could

hear it, but I am not sure if anyone behind you could.

Mr. MARTIN. Is that better?

Mr. PLATTS. Thank you.

Mr. MARTIN. Reliable data, both financial and non-financial, are

critical, because if one is wrong, then the resulting analysis can be

wrong. And in light of this subcommittee’s interest in promoting

the use of cost accounting across the Government, as you mentioned previously, you have asked us to look at two things in the

Departments: How are they generating cost information, and how

they are using it.

I do have a written statement that I would like to submit for the

record, but I will take about 5 minutes to recap our work. I will

start with the Department of Labor and then talk about Veterans

Affairs.

The Department of Labor, with leadership from the Chief Financial Officer and the Secretary, has implemented a department-wide

system. Virtually all of its components built models that have been

customized to meet their respective business needs. The system

uses financial information that comes from the core accounting system. Non-financial information such as the number of hours

worked on a project, or the number of people trained, that kind of

thing comes from a variety of other sources.

We do believe the controls over this non-financial data need some

further attention to ensure data reliability. In its 2004 performance

plan, the Labor Department identified data validation as a challenge. In addition, the Inspector General recently reported high

error rates in performance data reported by grantees. The IG also

raised concerns about the use of this data for decisionmaking.

Labor officials have agreed and acknowledged the importance of

this data and have told us that they are implementing additional

measures to address this issue.

The Department of Veterans Affairs, as I will discuss now, has

taken a different approach. The VA does not have a departmentwide system. They have instead chosen to delegate the responsibility to the component administrations. We reviewed the two largest

components, which together account for over 95 percent of VA’s

budget. We found that one was implementing managerial cost accounting, and one was not.

At the Veterans Health Administration [VHA], they have a system in place that uses data from nearly 50 feeder sources. However, auditors have raised concerns about data reliability. For example, about a year ago the Inspector General reported that most

of the legacy systems at the Bay Pines Medical Center contained

inaccurate data. The IG further stated that this might be a systemic problem across VHA. In addition, VHA’s financial statement

auditor found that cost data from an old system that was no longer

being maintained, and thus contained errors, was being used for a

variety of cost analysis purposes.

At VA’s other large component, the Veterans Benefits Administration, we found that no system was in place and operating. We

were told that in March 2003 they had stopped using the system

that they had once been using. It was an activity-based costing sysVerDate 11-MAY-2000 08:55 Nov 30, 2005 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 D:\DOCS\24087.TXT HGOVREF1 PsN: HGOVREF1
4

tem. They stopped using it because there was a loss of key personnel, and also one of the methodologies they used for allocating indirect costs lacked credibility with some of their managers. So they

stopped using the system.

In closing, Mr. Chairman, I just want to emphasize that departmental leadership is required to implement managerial cost accounting. The leaders really need to focus on promoting the benefits of doing so, monitoring the implementation, and also establishing a system of controls that will ensure that the data used are reliable. This is true regardless of whether a department chooses a

department-wide approach or chooses to delegate the responsibility

to the components.

This concludes my statement. I would be happy to take questions

at the appropriate time.

[The prepared statement of Mr. Martin follows:]

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Mr. PLATTS. Thank you, Mr. Martin.

Mr. Mok.

STATEMENT OF SAMUEL MOK

Mr. MOK. Mr. Chairman, thank you for the opportunity to testify

on behalf of the U.S. Department of Labor concerning our efforts

to implement managerial cost accounting.

It is an honor to speak with you this afternoon regarding this

very significant financial management tool. The availability of

timely, accurate, and useful information is essential to any wellmanaged, effective organization. Managerial cost accounting provides program managers and decisionmakers an indispensable tool

for enhancing program performance. It improves accountability and

transparency for how well tax dollars are being spent.

To implement and, more importantly, sustain the use of managerial cost accounting across the U.S. Department of Labor, my office

developed a strategic plan and instituted a managerial cost accounting system which we named Cost Analysis Manager [CAM].

This system provides cost information to managers at all levels to

support program evaluation, decisionmaking, and cost effectiveness.

We began by providing Labor Department program managers

with cost information that had immediate value for improving their

programs. Today, we have begun to use managerial cost accounting

for budget formulation, justification, resource allocation, and determining best practices across similar programs or regions.

Through CAM, examples of agencies using managerial cost accounting are numerous. For example, in one of our enforcement

agencies, CAM results showed inspection costs were higher than

normal in one region as compared to a national norm. Initially, the

higher costs were attributed to a greater travel cost in that region.

However, analysis revealed the travel cost for the region was actually in line with the national average. The actual reason for higher

inspection costs was due to a longer time spent preparing investigative reports in that region as compared to the national norm.

One of our agencies used CAM to monitor the effectiveness of

projects supporting better jobs for women across the country. This

usage enabled better allocation of resources to new or existing

projects. Another agency used CAM for performance-based allocation of discretionary funds. Regions exhibiting better performance

received more resources to continue their excellent work.

A key factor in ensuring CAM’s ongoing success at the U.S. Department of Labor has been the leadership of Department of Labor

Secretary, Elaine L. Chao. Secretary Chao has a deep appreciation

for effective financial management and sound fiscal integrity. Her

understanding and support of managerial cost accounting have

been crucial to our efforts to make managerial cost accounting a

lasting legacy that will benefit the Department and American taxpayers for years to come.

In conclusion, the implementation of managerial cost accounting

is a continuous journey of gaining experience rather than a race for

the finish line. Success in implementation takes strong, sustained

commitment from senior management. As leaders, we must demVerDate 11-MAY-2000 08:55 Nov 30, 2005 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 D:\DOCS\24087.TXT HGOVREF1 PsN: HGOVREF1
16

onstrate to managers that this tool is designed to meet their needs

and not just another silver bullet.

I will be happy to answer any of your questions, sir.

[The prepared statement of Mr. Mok follows:]

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Mr. PLATTS. Thank you, Mr. Mok.

Mr. McClain.

STATEMENT OF TIM S. MCCLAIN

Mr. MCCLAIN. Mr. Chairman, good afternoon. Thank you for the

invitation to testify on behalf of the Department of Veterans Affairs

concerning the requirements of managerial cost accounting. First,

I would like to ask that my full written statement be made a part

of the record.

Mr. PLATTS. Without objection, it will.

Mr. MCCLAIN. Thank you, sir. Accompanying me today are Mr.

Ed Murray, the VA Deputy CFO; Mr. Jimmy Norris, the CFO for

the Veterans Health Administration; Mr. James Bohmbach, CFO

for Veterans Benefits Administration; and Mr. Dan Tucker, CFO

for the National Cemetery Administration.

My staff has worked with VA’s three administrations to comply

with the Federal Accounting Standards and Federal Financial

Management Systems requirements. This hearing and the GAO report have given VA the opportunity to review its managerial cost

accounting system and has spurred senior management to review

VA’s current practices. In response to the comments in the GAO report, VA has initiated a broad review of available software and

MCA programs to ensure VA systems provide the most accurate

and reliable cost data to senior management.

VA has been involved in managerial cost accounting since the

subject was first considered by the Federal Accounting Standards

Advisory Board. VA does not have a department-level cost accounting system.

Due to the broad differences in size, mission, and need, the three

VA administrations were directed in the 1990’s to establish independent cost accounting systems to meet the specialized requirements of their individual organizations. VHA, the largest administration in the Department, uses the Decision Support System while

the National Cemetery Administration uses Activity Based Costing.

MCA is not the sole source for making management decisions but

is used in conjunction with other factors in determining how resources are utilized. The review by GAO has given VA senior management the opportunity to evaluate VA’s current MCA structure,

and we are actively pursuing state-of-the-art solutions. While VA

currently does not have a central repository for its accounting data,

it does consolidate costs for the three administrations and staff offices in a statement of net costs along 10 business lines.

VA takes our financial management and stewardship responsibilities seriously. Over the past several years, our clear focus has

been to maintain an unqualified audit opinion, which we have retained since 1999, and substantially reduce VA’s auditor-identified

material weaknesses and reportable conditions. From 2001 to 2004,

VA has reduced material weaknesses and reportable conditions

from 11 to 4, a reduction of 60 percent.

However, VA realizes that more needs to be done in MCA, and

we have initiated a review, and we will explore all opportunities for

a department-wide MCA system. A centralized MCA system would

improve the accessibility and availability of cost accounting data

and enhance managerial decisionmaking throughout VA.

29

Mr. Chairman, this concludes my statement. I will be glad to answer any questions.

[The prepared statement of Mr. McClain follows:]

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Mr. PLATTS. Thank you, Mr. McClain.

We are joined by the gentleman from Tennessee, Mr. Duncan.

We appreciate your being with us. We will go into questions. Again,

we appreciate your testimonies and all of your service to our fellow

citizens, both the GAO, Department of Labor, and Veterans Administration.

As one who has not worn the uniform of our Armed Forces, I am

especially grateful for the assistance and guidance given our veterans through the VA because I just think our veterans, if there is

a group of Americans worthy of our fellow citizens looking out for,

it is our veterans. So the work of you and your staff is much appreciated in doing right by those who have worn the uniform of our

Armed Forces.

I guess we will start with some specific examples of managerial

cost accounting. Mr. Martin, if you want to start and give us some

examples that, in your review of the two Departments, you want

to highlight as good examples of the benefits of MCA, and that we

can put some specifics with what we are talking about.

Mr. MARTIN. I would be happy to, Mr. Chairman. I think what

managerial cost accounting does for you is enable you to get a look

at both cost and performance or output information at the same

time. A lot of people tend to look at one or the other, but this

brings both together, and it allows you to do what I think both of

the other gentlemen referred to, which is make resource allocation

decisions. You can direct your resources to programs that are efficient and effective, and therefore, you can deliver more services for

your constituents.

We did see examples of resource allocation decisions, budget formulation, and budget justification, that kind of thing. We saw at

VHA they analyzed costs across different hospitals to look at how

they were doing things. Within the Department of Labor, they were

looking at the training programs and the cost of delivering those

at different locations, and unit cost, per person cost, that kind of

thing. So we did see some good examples.

Mr. PLATTS. That information at more the micro-level in evaluating specific training programs and how effective they are with the

dollars spent, did you see that transfer all the way through the policymakers up to the Secretary level in how that information was

shared through the Departments?

Mr. MARTIN. Well, certainly, at the Department of Labor, I think

it is clear that is more of a department-wide initiative they have

ongoing, and there has been more Secretarial involvement. And it

has just been made a priority. So I would say yes, that Department

did some of that.

Mr. PLATTS. You referenced the budget preparations, not just the

preparations but in what is submitted to Congress. I don’t serve on

the Appropriations or Budget Committees, but is there a good use

of the managerial cost accounting data in making the case then to

Congress as part of the appropriations requests when those budgets are submitted?

Mr. MARTIN. Well, I think the process is more mature than the

data at this point. I mean, even at Labor, they have some data

issues that they acknowledge and are addressing. So I think that

as they get better and better data, then the budget formulation will

40

be more accurate because what managerial cost accounting does is

enable you to see what your costs have been with some precision

over years, what the trend is, and you can then better predict what

you need in the future.

Mr. PLATTS. Mr. Mok and Mr. McClain, we will start at a similar

place, if you want to highlight what you think would be one of the

best examples of where managerial cost accounting has benefited

your Department in the provision of services in a very efficient, effective, responsible manner.

Mr. MOK. At the U.S. Department of Labor, as Mr. Martin said,

we have used managerial cost accounting rather extensively. We

have trained 250 managers and senior staff on the use of the managerial cost accounting, and we have also briefed senior executives

on an individual basis.

The knowledge base is expanding every day. I would like to see

it much bigger, but it will take a little time. The managerial cost

accounting allows us to understand the true full cost of delivering

services. It also allows us to understand the cost drivers of how

some of these program costs are derived.

One of the examples I would like to share with you is in one particular case, an agency was noticing that investigative costs in a

particular region were very high. So when they started analyzing

that, the regional administrator surmised that one of the reasons

the cost was high was because of the new staff, the learning curve.

For the following fiscal year when they did the analysis, it validated that assumption, because the cost went down once they

learned how to do the investigative report faster.

Another example was a performance-based allocation method

used by another agency to allocate a portion of the discretionary

budget based on efficiency and measurement of success which, to

us, is important because it is better use of tax dollars. Another example is a particular agency in of the Labor Department that use

data as budget justification for resource allocation rather extensively, and this resulted in a much better budget presentation. So

we have many examples of success in that category.

Mr. PLATTS. Mr. McClain.

Mr. MCCLAIN. Mr. Chairman, thank you. As the GAO report

pointed out, there were two administrations that used the managerial cost accounting system in VA. The largest of those, which takes

up the vast majority of our resources and our employees, is the

Veterans Health Administration, and they use the Decision Support System. That system does have a feed of over 50 inputs and

is used at the medical center level and at what we call the VISN

level.

Now VISNs are Veteran Integrated Service Networks. Essentially, they are areas, and we have 22 of those VISNs around the

United States. We have a VISN Director who also monitors budget

needs, resources, and such. And so, the Decision Support System

is used by the Medical Center Director and by the VISN Director

who has many medical centers under his or her responsibility.

Also, the VA has what is known as a VERA allocation. Now, the

VERA allocation is a Veterans Equitable Resource Allocation, and

it is essentially a fund that VA keeps back and distributes as we

see the workload across the United States. And so, as the workload

41

comes to us, then we are able to provide funds as to where the veterans are and where they come to us for service. That Decision

Support System is used directly in determining what the VIRA allocation will be.

Also, our National Cemetery Administration has an accounting

system which is an activity-based system, which they are able to

determine the unit costs for all of their cemetery services. And everything that they do in our 120 national cemeteries from a managerial aspect is run through this activity-based accounting system.

Mr. PLATTS. A quick followup, then I want to yield to my colleague, Mr. Duncan, on the use of the process in the allocation of

resources so that where the veterans are, you have the dollars to

meet the services that are going to be provided, or other examples

within the Department.

Is there a broad ability, when we look at the requirements for

managerial cost accounting and the accounting standards of the

Federal Government and how it applies to each of your Departments, to say by doing this, by fulfilling these requirements, X dollars were saved or X dollars were better spent over the course of

the past year?

I imagine that it is hard to put a dollar amount in total because

it is more about are you providing the service in the best way you

can versus actually saving dollars, but is there an ability to do

that? Because one of the things we are looking at as a committee,

and I talked about it in Orlando, is this comprehensive review of

what we require of all our Departments and agencies and what

makes sense today, and part of that is a cost benefit analysis in

what we are requiring. Is there a gain back to government and ultimately to the people? Is it too difficult to actually put dollar values because of the way this information is used?

Mr. MOK. If you talk about payback, there is payback in two

ways. As you know, our system, our cost model at the Labor Department is about 1 year old. We went live here in the last fiscal

year. So it is still in a maturing stage. We do not look at this system as a pure payback, but as a mechanism. We look at it as how

to maximize our resources, so that we have better accountability

and more transparency through the process.

I also personally believe that because of better information coming out of the system, we will have better information, and therefore can provide better service and better results. And through

that, we will get a reduction in waste and mismanagement. As our

system matures, I am very confident that we will start being able

to measure the actual cost savings, because if our managerial cost

accounting cannot measure cost savings, we have a problem.

Mr. PLATTS. Do you want to add anything, Mr. McClain?

Mr. MCCLAIN. No, I would like to say what he said. [Laughter.]

At VA, we do not have a specific number that we could attach

to our managerial cost accounting systems. We do track what we

call management efficiencies, which is a conglomeration of management actions which we feel have saved money for the taxpayer.

Mr. PLATTS. OK. Mr. Duncan.

Mr. DUNCAN. Well, thank you very much, Mr. Chairman. I know

it is not the most exciting thing in the world to talk about managerial cost accounting and subjects like we are discussing here today,

42

but I want to commend you for continuing to look into ways to

make the Federal Government more accountable, more efficient,

more economical, because I know people’s eyes glaze over when you

talk about a national debt of almost $8 trillion now that in a few

months will be $9 trillion because that is where we have raised the

debt limit to.

We are getting into a very dangerous situation. It is not going

to be 2038, or 2043, or some year way off in the future when we

are not going to be able to pay all these veterans’ benefits, or Civil

Service pensions, or Social Security pensions, or Medicare, or Medicaid, or some of these other things. I think that we all need to desperately work together to try to make the Federal Government

more economical and more efficient. I know one columnist for

Scripps Howard recently said that we are heading into a financial

tsunami, is the way she put it, a financial tsunami, when the baby

boomers start retiring.

Now, in this report, and I am sorry I didn’t get to hear the testimony. I have been in other meetings. But it looks like the Department of Labor came out pretty good. It says the Department of

Labor has implemented a department-wide MCA system with 15 of

its 18 component agencies. And it says while DOL has various controls in place over financial data, GAO found that controls over

non-financial data need further attention to ensure reliability. DOL

officials are taking additional steps to address those issues. So it

sounds like progress is being made there.

The question I have, though, comes in the next part of the report.

I assume that what we are aiming at here is that this managerial

cost accounting system is the best way to go. But it says that the

Veterans Benefits Administration had discontinued use of its MCA

system in 2003 because of system credibility and personnel issues.

I am wondering what problems came up.

I serve on three committees and seven subcommittees. In addition, I read about all these other things and try to keep up with

them. Whenever any department or agency of the Federal Government messes up, or gets in a scandal, or has a problem they always

say one of two things, or maybe both. No. 1, they always say they

are underfunded. No. 2, they say their computer system is obsolete

or their computers can’t talk to each other. Those are the two

things.

Well, the computers that the Federal Government has are far

better and far more advanced than those found in the business

world, because we are told that computers are obsolete the day that

they are taken out of the box. So everybody can always say their

computer system is behind the times. But what do we need to do

here?

I know the Veterans Administration is not underfunded because

they have gotten a $3 billion or $4 billion increase every year since

I have been here, and this is my 17th year here. When I first came,

the appropriations were down to $28 billion or $29 billion. Now we

are up to about $67 billion, and that is fine. I am not criticizing

that, but I am just saying that I don’t think there is any underfunding there.

I am not an accountant. So I assumed something that maybe I

shouldn’t have assumed. Is this managerial cost accounting the

43

way to go, and if so, why did the Veterans Benefits Administration

discontinue use of the MCA system? Was something better done?

Mr. MCCLAIN. Congressman Duncan, I am from the VA, and I

think I can attempt to answer that question. I will not give you either of those excuses. There was no funding problem that entered

into that decision, nor was it particularly a computer problem. It

was a situational problem, however, and the situational problem

was simply that the expertise that was resident for that particular

activity-based accounting system retired and left the administration, left the Veterans Benefits Administration.

And it was, I will have to say, a lack of oversight in senior management that allowed it to lapse and not require it to startup immediately again. It is currently being restaffed and restarted, and

there will be a managerial cost accounting system in VBA. So the

answer to your first question really is yes, I believe the managerial

cost accounting system is a benefit and is the way to go, and all

three administrations in the VA will have theirs.

Mr. DUNCAN. All right. OK. Thank you very much, Mr. Chairman.

Mr. PLATTS. Thank you, Mr. Duncan. Let me pick up there in the

comparison of the Department of Labor both in the approach of

what is already in place with managerial cost accounting and also

the manner in which it has been put in place, department-wide

versus component-specific, with the Department of Labor having it

department-wide and Veterans Affairs being component-specific.

Mr. Martin, in your review of the two, obviously you found differences in the two Departments’ evaluations. Is there a recommendation that you want to expand on as to one approach or the

other based on what you found on these two Departments?

Mr. MARTIN. I think that either approach can work. You can either have a department-wide system, or you can delegate responsibility. But I think in either case, you are going to have to have

Department level leadership that focuses on making sure it gets

implemented, monitoring it, and setting up the proper system of

controls and oversight. So I think either approach can work.

Mr. PLATTS. It seems like that leadership issue at the top levels

is especially important. With Secretary Chao, we have seen that,

the Department of Labor taking a very hands-on approach. And

that is something that you would identify as one of the keys to the

success of the Department of Labor’s experience?

Mr. MARTIN. Yes, absolutely.

Mr. PLATTS. At the VA, Mr. McClain, taking that component-specific, and you have just talked about where you are heading. My

first question would be in the decision to focus on the material

weaknesses and internal controls, especially specifically on internal

controls, I strongly believe in that foundation place. Unless you

have those good internal controls, whatever you are doing beyond

that is going to probably be challenged to have good results because of the data not being verifiable.

But the law, when that decision was made, was still that you

were to be engaged in managerial cost accounting under the CFO

Act, the FFMIA, and various regs. It seems to me the decision to

step back with one of the components was contrary to the legal requirements on the Department at the time. Do you interpret that

44

differently, or just that you made a decision that maybe didn’t fully

comply with the legal requirements regarding managerial cost accounting, but you just had to do what you had to do to start at a

foundation level?

Mr. MCCLAIN. I think it would probably be the latter, Mr. Chairman. Certainly, there was no conscious decision to violate the law

or ignore the law. We are well aware of it, and we intend to be

fully in compliance with the law. The Veterans Benefits Administration will be gearing up a managerial cost accounting system this

year in fiscal year 2006, and they will be on board as quickly as

we can get them up.

Mr. PLATTS. The approach is still to take a component-specific,

though, not a department-wide plan, right?

Mr. MCCLAIN. The first step is getting all administrations on

board with an MCA program. The second step is a review. Now,

when the decision was made historically, I understand that the different administrations do their own, that was at a time, as Congressman Duncan said, things changed, computers changed, software changed. There wasn’t anything out there that we saw that

could handle a Department of our size.

We want to take another look now, because software has come

in leaps and bounds, and now there are much better programs,

much faster computers. And so, we want to take a good survey of

the field to see what is out there that could possibly handle a $67

billion budget.

Mr. PLATTS. Is there a timeframe for that review and making

those decisions?

Mr. MCCLAIN. The Secretary has set no timeframe although personally I would like to see it done within 6 months.

Mr. PLATTS. Mr. Mok, as far as at the Department of Labor, can

you share, first in the decision to do it on a department-wide approach rather than component-specific, and now after this first

year, your thoughts on that decision and how it is working?

Mr. MOK. From our experience at the Department of Labor, we

started this project in the late 1990’s, and we started typically like

other Federal agencies with small pilots that did not yield a whole

lot of success. Then in 2002, shortly after I arrived there, I looked

at the situation, and we decided we would take a lesson from Detroit. We want to have a common approach and yet allow all the

different agencies to do their own thing.

As you know, the Department of Labor is a conglomerate. We

have many operating divisions with different cultures, different

needs, and different management approaches. So what we did we

built a common chassis and allowed each agency to build an SUV,

a truck, a sedan, but at the same time we have a lot of standardized components, such as the drive train. So that way, we can talk

to each other, at the same time we have some control and also minimize costs. Because with managerial cost accounting, if it is not

cost controlled, then it is not managerial cost accounting.

Mr. PLATTS. How about on the internal control aspect, especially

on the non-financial, one of the issues identified that was a weakness, and where you stand on trying to correct that weakness?

Mr. MOK. Yes, GAO’s report indicated that our non-financial data

needed to be validated in a more systemic and a formal manner.

45

We do not disagree with that. We feel comfortable with the process

so far. We acknowledge, absolutely, there is plenty of room for improvement. However, we are comfortable with our data at this

point, because all these non-financial data at different levels are reviewed.

For example, labor distribution, they have time cards; they have

different levels of checks. We acknowledge, however, the GAO finding that we should and we can go about it in a more systemic and

a formal manner, which we intend to, and we are committed to do

that.

Mr. PLATTS. Is part of that one of the things highlighted in Mr.

Martin’s report, the lack of a post-implementation review, and that

would give you some good data to know what you thought was

going to be the case, and to how it would play out, and to what

actually happened? Is that something you are reconsidering or addressing in a different fashion?

Mr. MOK. We have never opposed a post-implementation review

at the Labor Department. Under the leadership of Secretary Elaine

L. Chao, she is, as you know a Harvard MBA, so she really knows

a lot about management, we have a very methodical method toward a lot of projects and management issues. One of which we use

extensively is something called a Technical Review Board. Technical Review Board managers always take projects and look at a

standardization of approach.

The Technical Review Board consists of key members throughout

the whole Department in the management team. And one of the requirements of the Technical Review Board is any time when a new

system is operational, 6 to 9 months after that, we would do a postimplementation review. So when GAO came in, absolutely, we had

not done a formal post-implementation review. But I believe, if I

remember correctly, when GAO came in and reviewed the project,

it was about 6 to 7 months after we went live.

In the meantime, we have been using users groups. We have informal meetings. We have executive briefings of lessons learned,

shared best practices. So we have a modified form of post-implementation, not as formal as GAO would like to see. We agree it is

a good methodology. We intend to do that, but our time line basically calls for it after 6 to 9 months of full implementation. Our

Technical Review Board has procedures in place to do what we call

a post-implementation review. So the short answer is yes, we do it.

Mr. PLATTS. Mr. Martin, that would really get to what you ultimately would like to see, right?

Mr. MARTIN. Yes, it would. Yes.

Mr. MOK. And you have our assurance that is something that we

plan to do.

Mr. PLATTS. Great. The issue of internal controls and the importance of that, whether it be the financial data or the non-financial,

is an issue that is beyond just managerial cost accounting. But

when we passed legislation last year and tried to help the Department of Homeland Security get its arms around its many material

weaknesses that it inherited from the 22 different agencies that

came together as that new Department, one of the requirements in

the legislation we passed was an internal control audit to get that

baseline of their internal controls to then build on, instead of playVerDate 11-MAY-2000 08:55 Nov 30, 2005 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 D:\DOCS\24087.TXT HGOVREF1 PsN: HGOVREF1
46

ing catch-up and not getting to where the Department of Defense

is 40 years down the road. It is tough to go back and do it all over.

With both of your Departments, is that something that going to

that extent would be worth the investment, the cost? Obviously,

they are different sized Departments, and what it would involve,

and the cost of each. But your opinion on that type of approach,

I would be interested in.

Mr. MOK. VA is a lot bigger. So I will defer to someone else.

Mr. MCCLAIN. Thank you. Mr. Chairman, that is certainly an excellent suggestion. We have quite a few programs going on right

now that are addressing internal controls, in particular the requirement that we be in compliance with A123. So we are actually in

the process right now of trying to assure that we have the internal

controls in place so that we can meet the certification requirements

of A123.

Mr. PLATTS. But not to the extent of actually doing as part of

your audit, having an audit opinion on your internal controls,

right?

Mr. MCCLAIN. That is correct.

Mr. PLATTS. I know at DHS, the estimate, because they are required in the coming year to do that, and $4 million is what they

are estimating the cost of that. Given some of the breakdowns in

internal controls that we have seen with that Department, we

think it will be money well spent because of the possible savings,

but that is going to, again, vary by department.

Now, I know at the Department of Labor, you led the charge on

the quarterly reporting regarding internal controls and the importance of that. As far as going to the level of an actual audit, is that

something you think worthy of the expenditure of those funds?

Mr. MOK. We always support a higher, enhanced process of internal control, and we always support strengthening the control process because we believe that investment up front is a lot more than

spending money to fix the damage afterwards. At our Department,

we believe that we may be one, if not the first, Department to ask

senior managers to provide quarterly certifications to the Secretary.

And these certifications are very important, because I personally

meet with all the assistant secretaries on a one-on-one every quarter. And if a particular Assistant Secretary fails to find time to

meet with me, I inform the Secretary, and that person will get a

call from the Secretary.

When we sit down, it is at least half an hour. I remind the Assistant Secretary of their fiduciary responsibility under the law on

the importance of internal control. I explain to them the current requirement on internal control and also give them a chance to talk

about problems and how to identify problems early, so that we

don’t wait until the end of the year.

And at the same time, we help them answer three questions

when something happens. The three questions I always remind

every assistant secretary they need to answer are: when something

happens, what did you know, when did you know, and should you

have known. The first two questions are easy to answer. The third

question will get a lot of people in trouble, and we try to keep them

out of trouble. So that is, we believe, a good investment.

47

Mr. PLATTS. Good approach.

Mr. MOK. Thank you.

Mr. PLATTS. For all of us.

Mr. MOK. Thank you.

Mr. PLATTS. How about the relationship of Congress with your

Departments and the various requirements? We are looking at the

reform of statutes and how to streamline them. Is there something

that is missing from a statutory standpoint that would help you

when it comes to managerial cost accounting, anything that would

give you additional leverage or authority?

Mr. MCCLAIN. Nothing that I am aware of, sir.

Mr. MOK. I think we have many very good statutes already in

place. I think we need to do a better job together to enforce, enhance, and implement some of these statutes. I am not sure if you

can legislate behavior. I think a lot of this better Government has

to come from the culture of the organization. And I believe that the

leadership sets the tone.

I believe that in our Department Secretary Chao has set a very

excellent atmosphere and has given her unyielding support in that

respect. As you may recall, she inherited United Way after a big

financial scandal. So she is extremely sensitive and very, very appreciative of the importance of fiscal integrity and good financial

management. And I am very blessed to have the opportunity to

serve in that Department under her.

Mr. PLATTS. That is something the report highlights, the importance of that senior leadership. I would gather from your comment

that having it at the Secretary level is critically important to the

success of managerial cost accounting, not just at the CFO level,

or the CMO, but that it is clear to everybody within that Department that this is a priority.

Mr. MOK. I agree 100 percent. The CFO alone cannot do it. Without the unyielding support and the commitment from the Cabinet

Secretary, I do not think we would be able to accomplish as much

in managerial cost accounting as we have today. We still have room

to grow. We still have improvements to make. But we got to where

we are because of the support from Secretary Chao.

Mr. PLATTS. Mr. McClain, would you like to add anything?

Mr. MCCLAIN. No, sir.

Mr. PLATTS. OK. The other aspect of Congress’ role is not just

statutes but is money, and part of the report seemed to identify

that the lack of funding may have played a role. Mr. Duncan is not

here to hear me say this, but it may have played a role in the approach you took and the focus on managerial cost accounting across

the Department. Is that a problem with dollars that are specifically

provided by Congress for this aspect of the Department’s administrative work?

Mr. MCCLAIN. In today’s VA budget, no, sir. It is not. That is not

the problem.

Mr. PLATTS. OK, great. On the other hand, Mr. Mok, the Department of Labor seems to be on a great track and has already had

some important successes. How do you see maintaining that from

a finance standpoint, that you have the resources to continue to implement and move forward?

48

Mr. MOK. We have been funding this initiative with existing resources. However, if Congress would like to give us more money,

we will always put it to very good use. [Laughter.]

Mr. PLATTS. As a non-appropriator, I say sure. [Laughter.]

I will commit my appropriator friends to just that. They may

have something else to say about it. I think one of the challenges

for Congress is that to save money, we do need in certain instances

to spend money, whether it be on internal control audits or just

having the manpower to effectively do managerial cost accounting

and to make sure of your internal controls. In challenging financial

times, we sometimes maybe forget that, that we are hurting the

Federal Treasury because saving money up front means it is going

to cost us more down the road.

And that is something as a subcommittee, we try to make that

case to leadership and administration appropriators that, in some

instances, spending more money actually will end up being a savings. So we will continue to press that message.

On a specific issue, Mr. McClain, I don’t think you will be surprised at my questions regarding the shortfall at the end of this

current year that seemed to come out of the blue with the Department of Veterans Administration. If you want to summarize what

happened and how managerial cost accounting played a role, either

because we didn’t do a good job, and that played a role, and why

we had this shortage come up on a quick notice, or how could it

have been prevented if we had done a better job.

Mr. MCCLAIN. Mr. Chairman, no, it is no surprise that question

may come up. The supplemental and indeed the amendment for

2006 has been the subject of several hearings already in the House

and the Senate. Rather than kind of rehash what was said at

those, I will try and concentrate on the managerial cost accounting

aspect of this.

There were a lot of reasons why this occurred, and probably the

greatest of the reasons is that more veterans came to us than we

projected. Now, there are a lot of reasons why, and No. 1, that

more veterans came, and No. 2, that our projections were not accurate as to who might come to us for care. I am talking mostly

health care here, because that is the largest part of our budget.

Probably the main reason is that the model that we used for projecting for who might come to us used data that was over 2 years

old, about 21⁄2 years old, by design. That is the way that the model

was designed.

And a confluence of events, one being that the VA is a very good

health care system. In fact, according to JAHCO, we are the No.

1 system in the United States right now. So we are just getting

more people coming to us for care. We are getting more people coming to us for the pharmaceutical benefit and for a lot of other

things that VA has for our veterans.

The other thing is that managerial cost accounting, for the most

part, is a look back, or in other words, what did it cost us to provide a particular service. In some cases, then, that look back can

help you to project in the future how much it is going to cost to

provide services in the future.

So really, the problem came up about mid-year in fiscal year

2005. It was about March that it came up. So it was a workload

49

problem for the most part. In other words, more veterans came to

us for more services.

So it was not only an increase in utilization, the number of veterans is up; the veterans who are in the system used the system

more often; and the services that they were requiring were more

costly than we had predicted because we are getting into an older

population. Our veterans who come to us for health care have an

average age of, I think, 68.

So as you get older, I don’t think it is any secret, you require

more services, and more tests, and more expensive services. And as

we testified at the House Veterans Affairs Committee, the model

needs to be adjusted so that we can pick those things up much

quicker than at a 2-year or 21⁄2 year interval.

Mr. PLATTS. One quick specific question on that average age, is

that dropping, that veterans are coming earlier?

Mr. MCCLAIN. That is a good question.

Mr. NORRIS. I am not sure I know the answer to that right now,

but I think overall, it has remained fairly constant over time. It is

rational to assume that with the advent of the OIF/OEF veterans

coming back and availing themselves to services, that one would

expect that perhaps that would drop some.

Mr. PLATTS. Also because of the escalating cost of health care for

everybody that veterans who maybe wouldn’t have come into the

system at all because their own health care was covering it, but are

finding they are struggling more to pay the bill, they are accessing

the system.

I use my father as an example who has now passed on 4 years

ago, but he never did access the VA health care. He was in the

process of doing it at the time he passed away. Because he was in

his early 70’s, and even though he had retirement health care——

Mr. MCCLAIN. Right.

Mr. PLATTS [continuing]. He was starting to have more out-ofpocket costs in addition within that coverage. So he said, well, it

is a benefit I really never intended to use, but given what is happening.

So my thought is, given the whole environment out there with

all of our citizens, including the veterans, that you are going to

continue to see more accessing, earlier rather than later. That

being the case, and what you already found this year, your model,

I assume, is being adjusted or has been adjusted to reflect that you

are likely to continue to see that trend?

Mr. MCCLAIN. Yes, sir.

Mr. PLATTS. I think from a congressional standpoint, we want to

provide whatever the need is. We have programs available for good

reason. These are men and women who have served our Nation,

and when they come, we just need to find the means to provide the

assistance. Your Department, I think, has worked hard to do that.

In Congress, we need to stand ready to ensure you have what you

need in those resources.

I have tried to run through these questions in a number of different areas and shortcut in a number of areas, because the series

of votes that we are about to start between several amendments,

10 minute debate on recommittal, 15 minute recommittal, final

passage, my guess it is going to be at least an hour. So we are

50

going to conclude here shortly before I go so that you don’t have

to wait here. I am sorry in the sense that I may be rushing through

some of these areas that I was planning on expanding on a little

further.

Actually, I had a followup question on the specific, and it just

went out the window. If it comes back to me, I will followup with

you.

Actually, it was specifically on VA. It was on the response to the

report. In the response back to GAO, you seemed to take exception

to some of the findings in the report regarding the reliability of the

data. The report was saying that you needed to look at the reliability of the data you were using closer, and you seemed to take a little bit of an exception to that finding of the report. Your IG’s report

seems to correlate with what Mr. Martin’s finding found.

I was wondering if you could explain further why you took exception, or what it was that you disagreed with regarding the reliability of data that you were referring to?

Mr. MCCLAIN. Well, Mr. Chairman, I think that is a fair question, and we did disagree just on the level where I believe the GAO

report said that we didn’t have certain training, we didn’t have certain people in place, we didn’t have certain controls, reliable data.

Mr. PLATTS. But that is more of a systemic problem is what I

think their finding or thought was.

Mr. MCCLAIN. Right, and I believe we do have reliable data. I

mean we try and scrub the data. We try and double check it and

cleanse the data. And from a day to day operational point of view,

where a senior manager could rely, or a front line manager could

rely on the data, I believe that it is reliable for business purposes

and for business decisions.

Can it be better? Absolutely. Do we need to do more? Yes, and

we will continue to work toward ensuring that we have the absolute best data that we can. But we have been doing this for quite

a while and realizing that, after what happened this year, it is kind

of difficult to make the statement, but actually, we have done pretty well in the past 5 or 6 years on hitting our projections and making the proper decisions of placing assets where they should be.

Mr. PLATTS. Mr. Martin, in the exchange since your report and

the feedback from the Department, where do you think the Department is, or specifics that you would encourage the Department to

further look at to ensure the reliability?

Mr. MARTIN. I like what I am hearing about the management

commitment and leadership commitment, obviously, some very

good plans there, I think, and intentions.

I think maybe the data issue is indicated by the problems they

had with the model, that was that data was 21⁄2 years old. It illustrates some of the problems you can have if you aren’t really active

in making sure you have the best available data. It can cause you

to make some bad estimates. And that is all we are trying to say,

is that should be strengthened, and it should be looked at in the

materiality of the data and the accuracy of it.

Mr. PLATTS. Is some of that, such as maybe the time sensitivity

of the data, the 2-year old data versus using 1 year, that type of

concern?

Mr. MARTIN. Right. Exactly.

51

Mr. PLATTS. Mr. Martin, in wrapping up, before I run over for

these votes, your general thoughts that, as we look ahead to the

next series, what is most important that we take out of your review

of these two Departments, nicely with two different approaches regarding managerial cost accounting, department-wide versus entity-specific? Anything you want to make sure we take with us?

Mr. MARTIN. Sure. I think the key is leadership, and the leadership needs to focus on promoting the benefits of doing this, and not

just focus on it as a cost-cutting tool, but illustrate that this is a

way to deliver more services to our constituents. And that gets

your program people excited about it because they can do more, get

more bang for their buck.

When you draw people in that are not just your typical financial

shop people, instead of pushing it out, you create a pull from the

agency managers. You need leadership that promotes the benefits,

and that monitors the implementation, and then sets up the sound

system of controls and a process to make sure it all works. So that

would be, I think, the lesson learned at this point.

Mr. PLATTS. Thank you.

Mr. Mok, Mr. McClain, is there anything that you would like to

add, that you want to make sure of as we go forward as a subcommittee?

Mr. MOK. I agree with Mr. Martin 100 percent. Our approach is

basically, I would offer as an acronym to echo what he said, LOVE,

L-O-V-E. LOVE stands for leadership at the top; O is ownership for

the stakeholders; V is bringing value to the table for the stakeholders; and E is implement efficiently and effectively. And I think that

is how we managed to get the program to where we are today, but

good leadership also.

Mr. PLATTS. Well, love is always a good thing to share and

spread. [Laughter.]

Mr. McClain, anything? Hard to follow.

Mr. MCCLAIN. I need an acronym, and I don’t have one. [Laughter.]

No sir, I don’t have anything.

Mr. PLATTS. Well, we appreciate your participation here today.

Our intent as a subcommittee is to try to work as part of the same

team with those of our colleagues in the Departments or GAO, that

the end result is we are all just trying to ensure that the Federal

Government is as efficiently and well run and provides the services

to our citizens that they need.

Especially in the times we are in, and as we recover from

Katrina, and the recovery and rebuilding effort that is now underway, managerial cost accounting is something that really can play

an important role. As we say, we have a lot of money, it is not an

unlimited sum. What we can put into this effort? How can we best

use it, and what is the best return for the investment to those in

need?

As a subcommittee, we appreciate the case studies of your two

Departments, because that gives us some initial data as we go forward with GAO and some other reviews. Again, besides your testimony here today, just day in and day out, your work and leadership in your Departments, Mr. Martin at GAO, we are grateful for

52

your service and glad to be part of the same team with you. Thank

you.

We will keep the record open for 2 weeks for any additional information that needs to be shared. Otherwise, this hearing stands

adjourned.

[Whereupon, at 3:45 p.m., the subcommittee was adjourned.]

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